The year 2013 was a year of survival for the real estate sector, but expectations are now high among developers and analysts. The industry is pinning hopes on a mid-year turnaround after the General Elections, it is not likely to materialise given the time lag for policy implementation.

So how would 2014 pan out for realty? The first three quarters would see much of the problems of last year persisting, before showing some signs of change. Few experts believe that prices in several locations will go northward.

That would be constraints since the problems of the sector remain unsolved, and policies have made no substantial impact, and those on the cards may not be enough to give the required momentum.

Persistent problems

It was a year of “slow-down, stagnancy and stalling” for real estate, says Sachin Sandhir, MD, South Asia, Royal Institution of Chartered Surveyors (RICS), a body certifying professionals and setting standards for the sector. “It was a year of much economic turbulence. The current account deficit has fallen to 1.2 per cent of GDP in July-September period, while inflation is again above 10 per cent, as recorded in October. Wholesale price inflation was at an eight-month high of 7 per cent while retail inflation crossed 10 per cent. The rupee dropped sharply by net 22 per cent during first two quarters. Private equity (PE) investments witnessed a drop of over 65 per cent for the quarter-ended September 2013. All of this has negatively impacted investment sentiment.”

Even as the rupee fell, NRIs cashing in on the foreign exchange situation did not show up in sales numbers. The Reserve Bank of India’s actions too, did not help. “Monetary tightening resulting from RBI’s measures to control inflation was the major macro influence on the real estate business in India,” says Shishir Baijal, CMD, Knight Frank India, a real estate consultancy firm.

“High interest rates, spiralling vacancy levels and lower margins arising from inflationary pressures too, led to a slowdown which resulted in reduction of new launches and also delayed project deliveries. Developers with exposure to residential projects are worried as slow sales have created a situation of oversupply in many parts of the country,” adds Baijal.

Election time

The industry is anticipating relief in in Budget 2014-15, post elections. “As far budget is concerned, there could be some appeasement for votes and some concessions to developers for funds by the outgoing government,” says a property consultant